The National Assembly approved the government’s tax-heavy finance bill for the upcoming fiscal year on Friday, ahead of further discussions on a fresh International Monetary Fund (IMF) bailout as it strives to avoid a debt default for South Asia’s slowest-growing economy.
The government published the tax-laden budget two weeks ago, eliciting strong condemnation from opposition parties, particularly the PTI and coalition ally PPP.
Finance Minister Muhammad Aurangzeb introduced the finance bill in parliament, which had been opened for changes and debate by the ruling alliance, led by Prime Minister Shehbaz Sharif, and the opposition.
Opposition groups, mostly legislators backed by now jailed former Prime Minister Imran Khan, have rejected the budget, claiming it will be excessively inflationary.
Speaker Sardar Ayaz Sadiq declared the bill’s passage on live television.
In the national budget released on July 12, policymakers set a tough tax collection target of Rs13 trillion rupees for the fiscal year beginning July 1, up around 40% from the current year, in an effort to bolster the case for a fresh bailout arrangement with the IMF.
Pakistan is in negotiations with the IMF over a loan between $6 billion to $8 billion.
The tax objective increases by 48 percent in direct taxes and 35 percent in indirect taxes above updated forecasts for the current year. Non-tax revenue, including petroleum taxes, is expected to increase by a stunning 64 percent.
Textile and leather items, as well as mobile phones, would face an 18% tax rise, in addition to an increase in capital gains tax on real estate.
Workers will also face higher direct income taxes.
The government has predicted a substantial decline in the budget deficit for the upcoming fiscal year to 5.9 percent of GDP, down from an upwardly revised projection of 7.4 percent for the current year.
The central bank has also cautioned of potential inflationary impacts from the budget, stating that insufficient progress in structural changes to widen the tax base meant that more income had to come from tax increases.
The growth target for the coming year has been set at 3.6 percent, with inflation expected to reach 12 percent.
